PepsiCo, Coco-Cola and others strengthen operations in India as China stagnates

FMCG market in India: India has rapidly become the focal point for major consumer goods companies like PepsiCo, Unilever, and Procter & Gamble, as these firms seek new avenues for growth amidst an uneven economic recovery in China. With India's economy currently expanding at the fastest pace among major emerging markets, these multinational corporations are targeting the country's diverse consumer base by launching a variety of new products tailored to local tastes and preferences.

Shift from China to India

Over the past decade, global companies had concentrated their efforts on the Chinese market, which was seen as the premier destination for growth. However, according to Brian Jacobsen, Chief Economist at Annex Wealth Management, the next decade is likely to see a shift in focus towards India, where both demographic and economic factors are more favourable. "You have to go where the demographic and economic tailwinds are at your back," he noted.

India's Consumer Market Potential

India, now the world's most populous country, is expected to see a significant boost in consumer spending due to increased government expenditure, a promising monsoon season, and a rebound in private consumption. This growth is anticipated to elevate the combined market share of the top five multinational companies—Coca-Cola, P&G, PepsiCo, Unilever, and Reckitt—from 19.27 per cent in 2022 to 20.53 per cent in 2023. In contrast, their market share in China is expected to decline slightly, reflecting the challenges in the Chinese market.

Corporate Strategies in India

To capitalise on this opportunity, consumer goods companies are making substantial investments in India. PepsiCo, for example, has introduced new products like Kurkure Chaat Fills, while Coca-Cola has upgraded its packaging to extend the shelf life of its offerings. Nestlé is planning to launch its premium coffee brand Nespresso in India by the end of the year. These efforts are paying off, with Coca-Cola's household penetration in India increasing by 24 per cent over the past year, while PepsiCo, Nestlé, and Reckitt have also seen notable gains in market penetration.

Strong Market Performance

The strong performance in India contrasts sharply with the situation in China, where companies like Nestlé have reported declines in sales. The economic and consumer sentiment in China has been "clearly weaker than expected," according to the company. Similarly, other multinational firms are witnessing sluggish growth in the Chinese market, which has traditionally been a key growth area.

(With Reuters inputs.)